Japan's newly approved plan to cut the consumption tax on food has been met with skepticism, as households continue to feel the pinch of rising living costs and experts have voiced concerns about its effectiveness.
The plan was approved by the Cabinet on August 5 to lower the tax rate on food and beverages from the current 8 percent to 1 percent starting next April.
In their campaign for the House of Representatives election in February, the Liberal Democratic Party and its junior coalition partner, the Japan Innovation Party, pledged to eliminate the consumption tax on food and beverages altogether for two years to help households counter inflation.
At a local market in Tokyo, several residents complained about soaring prices in recent months and shared their views on the new policy.
"I do feel the prices for some products and meat have gone up. You get less for a higher price. [As for the tax cuts], I haven't seen any effect," said a resident.
"When I go shopping, everything feels more expensive. Things have gotten more expensive. I think prices have risen this high because the Japanese government has done nothing. Lowering the rate to just 1 percent -- even if only for two years -- wouldn't make much of a difference, so I'd rather they didn't do it at all," said another resident.
Experts have pointed out that cutting the consumption tax may not effectively alleviate the financial burden on households.
"The policy was driven by Japanese politicians. As for whether it will actually work, it is still too early to tell. Personally, I have doubts on its effects. Some politicians are calling for a tax cut because the public, after two hikes, still resents the consumption tax deeply. By doing so, they are simply bowing to public opinion. So I am concerned that the tax cut will have only a temporary effect just like the currency intervention, and the benefits will not last long," said Hideo Kumano, head economist at the ABC Economic Research Institute.
The consumption tax has long served as an important funding source supporting Japan's social security systems, including pensions and medical care. How to fill the massive fiscal gap created by the tax cut has become a major concern.
"The consumption tax was introduced to provide fiscal resources for future social security, to sustain a rapidly aging society, and to distribute funds to local governments. That is the purpose of the tax. But if this fiscal revenue decreases without a clear alternative funding plan, once the tax is reduced, the tax revenue would fall, and the reduced part will be filled from other sources. However, there is no such a clear alternative funding plan coming out. Takaichi has long stressed to implement a 'responsible fiscal policy,' but in fact, this is an utterly irresponsible fiscal policy," said Hiroshi Shiratori, a professor of political science at Hosei University in Tokyo.
Japan's food consumption tax cut unlikely to ease household burden as prices surge
